As a Retiree, How Should I Calculate My Asset Allocation?

By Anna Prior

Question: When calculating my asset allocation, should I put dividend-paying stocks in the stock or bond category? I’m retired and don’t want to invest too aggressively.

– Jim Hess, Charlotte, N.C.

Answer: You’re on the right track: Loading up on income-producing investments is a tried-and-true retirement strategy. But just because an investment generates a steady yield, it doesn’t necessarily mean it’s a bond. A stock is a stock is a stock, pros say, and while the dividend-paying variety is usually less volatile than its nonpaying cousin, it’s still vulnerable to broader market drops in the same way, says Chad Carlson, a financial planner at Chicago-area wealth advisory Balasa Dinverno Foltz, which has nearly $2 billion under management. So, count those dividend payers among your stock allocation, he says, and consider a general rule of thumb: Match the percentage of your bond allocation to your age.

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